Rise in price of food expected to continue

You may have noticed your grocery bill is eating up more of your budget, and agricultural economists say the higher price of food is here to stay.

Compared to a year before, the price of food in January 2012 is up 4.2 per cent, and that's on top of already steep prices.

And since Canadians already spend an average of 10 per cent of their annual income on food, a rise in prices can be a big challenge.

Barbara Daly is a working mom, and the married mother of four changed her shopping habits a few years ago to deal with the rising costs, now getting groceries almost exclusively at the farmer's market.

"When I go into a grocery store and see the prices of fruits and vegetables it's shocking…[The farmer's market] is definitely cheaper than going to the grocery store, it's more relaxing, it's more interesting."

And she says it's definitely easier on her budget.

But it's not just that costs are on the rise. Many people are frustrated with food prices that go up and down like a yoyo.

John Cranfield, a professor of agricultural economics at the University of Guelph, says the volatility of prices is due to global connectivity.

In other words, what happens in one country has the potential to put a strain on the entire global market supply.

"We saw droughts in part of the United States, in Argentina, in East Africa, the remnants of the drought in Russia in 2010. All of those actually work to reduce the available supply of grain in the world and puts upward pressure on prices."

One prime example is what happened when Mexico, one of the world's biggest producers of corn, suffered the worst drought in 70 years in November 2011.

The country is now forced to import corn, which is already in high demand, from other countries at much higher prices.

Cranfield says "When supply of a commodity are limited, what that does is that tends to put the price up for the commodity."

On the other hand, a really good crop yield around the world can bring prices down significantly.

"We estimate that 65 per cent of our costs, to get the apple to this stage here ready for us to sell are labour costs."

Other factors that can affect prices include political unrest and the price of energy, which has an impact on both the cost of transporting goods to market and the cost to grow it.

Cranfield says "A loaf of bread includes more than flour from wheat. It includes labour that was used in the manufacture of that bread, it includes water, it includes other agricultural ingredients, it includes energy."

Consumers may find it confusing because they often don't see price increases right away. It can take six to nine months for a rise in cost to show up at the store level.

Coming up in part two: How much the price of food has risen, and what people in food-related industries think will happen next.

Photos

Labour costs, political unrest and the cost of energy can all impact food prices.

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